Why GM selected Korean manufacturer LG Chem for its Volt batteries

by
Sven Gustafson | Oakland Business Review

Monday January 12, 2009, 4:03 PM

General Motors picked a Korean battery maker as the supplier for the Chevrolet Volt plug-in largely because no domestic infrastructure yet exists to supply cells at the volumes needed, industry officials and analysts said.

LG Chem and its Troy-based subsidiary, Compact Power, won the contract over a competing team made up of A123Systems Inc. of Massachusetts and German auto supplier Continental. The cells will be assembled into packs produced at a new GM facility in Michigan, the automaker said Monday.

My earlier story about the selection of LG Chem was generating plenty of comments from readers, most of them upset over the awarding of the production contract to a foreign company. Here's what Prabhakar Patil, Compact Power's CEO, had to say about whether it was possible to produce lithium-ion cells here:

"It's a business decision," Patil said. "Some people try to make it into an emotional issue but it really isn't. It's driven by the volume.

"The bigger question is actually infrastructure. The labor content in the cell is relatively low. So as a result, there is flexibility. But in order to make that kind of an investment, not only for LG Chem but for suppliers for materials, etcetera, that's a significant level of investment and therefore you need to have enough of a business proposition, sustainable business, and of course infrastructure."

That infrastructure doesn't yet exist in the U.S., he said.

"That's something that is evolving and I have to give state of Michigan a lot of credit for what they are trying to do to support that," Patil said. "That's something we continue to evaluate and when the time is right we are open."

A123, which currently produces its lithium-ion cells in China, last week announced it plans to apply for federal grant money to build a production facility in Southeast Michigan.

But Bob Lutz, GM's vice chairman, explained to reporters why the company selected LG Chem for the Volt batteries.

"A123 is still sort of a startup, they're still ramping up, and A123 has been specializing mostly in ...cylindrical cells, which are good with power tools and stuff. What we need here is prismatic, which is flat cells. And LG Chem is just farther along," he said.

"And this is one of the things why we say, if we're serious about the electirifcation of the automobile, as part of the national energy policy we do need government support for advanced battery development, which of course Japan has...

"LG Chem has massive support from the Korean government in terms of a whole research campus was paid for by the Korean government because Korea recognizes that advanced battery technology is a key component of the country's competitiveness."